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Dropping Out of College, and Paying the Price

Graduates of Bowie State University in Maryland last month. Less than two-thirds of those who start college in America finish.Credit
Chip Somodevilla/Getty Images

David Beltrán has a solid understanding of the benefits of a college education. The 22-year-old from Queens — a journalism major at Brooklyn College — has seen too many friends drop out only to find themselves working at a fast-food counter or at a construction job. “They are getting by, but they are not very happy.”

And yet Mr. Beltrán says he probably wouldn’t have gone to college full time if he hadn’t received a Pell grant and financial aid from New York State to defray the costs. He has also heard too many stories about people struggling under an unbearable burden of student loans to even consider going into debt. “Honestly, I don’t think I would have gone,” he said. “I couldn’t have done four years.”

And that would have been the wrong decision.

His reasoning is not unusual. The rising cost of college looms like an insurmountable obstacle for many low-income Americans hoping to get a higher education. The notion of a college education becoming a financial albatross around the neck of the nation’s youth is a growing meme across the culture. Some education experts now advise high school graduates that a college education may not be such a good investment after all. “Sticker price matters a lot,” said Lawrence Katz, a professor of Harvard University. “It is a deterrent.”

College graduation rates in the United States are continuing to slip behind, according to a report published on Tuesday by the Organization for Economic Cooperation and Development, failing to keep pace with other advanced nations.

In 2000, 38 percent of Americans age 25 to 34 had a degree from a community college or a four-year institution, putting the nation in fourth place among its peers in the O.E.C.D. By 2011, the graduation rate had inched up to 43 percent, but the nation’s ranking had slipped to 11th place.

This from perhaps the first nation to try mass college education, graduating more students from college than anybody else. Graduation rates in the United States among 55- to 64-year-olds are higher than in any industrial country except Canada and Israel — reflecting the nation’s head start.

What’s most troubling, perhaps, is that Americans are actually enrolling in college and then dropping out halfway through — when they’ve probably already incurred a bunch of debt and won’t benefit from the better job prospects that come with a degree.

More than 70 percent of Americans matriculate at a four-year college — the seventh-highest rate among 23 developed nations for which the O.E.C.D. compiles such statistics. But less than two-thirds end up graduating. Including community colleges, the graduation rate drops to 53 percent. Only Hungary does worse.

And the most perplexing part of this accounting is that regardless of cost, getting a degree is the best financial decision a young American can make.

According to the O.E.C.D.’s report, a college degree is worth $365,000 for the average American man after subtracting all its direct and indirect costs over a lifetime. For women — who still tend to earn less than men — it’s worth $185,000.

College graduates have higher employment rates and make more money. According to the O.E.C.D., a typical graduate from a four-year college earns 84 percent more than a high school graduate. A graduate from a community college makes 16 percent more.

A college education is more profitable in the United States than in pretty much every other advanced nation. Only Irish women get more for the investment: $185,960 net.

What’s to be done?

Democratizing higher education is an urgent challenge. A study published Wednesday by the Hamilton Project at the Brookings Institution in Washington underscores how inequities in education are hampering social and economic mobility, contributing to entrenched income inequality.

The study points out that half of Americans in the top fourth of the income distribution have a college degree. Among the poorest fourth of Americans, fewer than one in 10 graduated from college. And the gap is growing. The college graduation rate of high-income Americans born in the 1980s was 20 percentage points higher than in the 1960s. Among low-income Americans, it advanced only 4 percent.

Every year federal, state and municipal governments spend a total of more than $9,200 per student in college, the O.E.C.D. estimates. Perhaps they could do more. According to the O.E.C.D., they make a profit of $231,000 on each American who graduates from college — mostly through higher income taxes and lower unemployment payments.

Increasing financial aid can increase the odds of keeping a student in college. But it can be expensive and not very cost-effective. Some students getting aid wouldn’t graduate anyway, and others would have graduated without it.

Eric Hanushek, a professor at Stanford University, argues that there is something inherently unfair about subsidizing students only when they reach college. “Subsidies to higher education are bonuses for the people who already are coming out ahead,” he told me in an e-mail. “These bonuses are paid partially by the people who were not the winners — the ones who did not attend college. Therefore, transfers are made from the less well off to the more well off.”

Other ideas look promising. A study by Caroline Hoxby, a professor at Stanford University, and Sarah Turner, a professor at the University of Virginia, concluded that providing high-achieving students from low-income backgrounds with personalized information about their college options would cost only $6 per student but could vastly increase their applications and acceptance to high-end colleges. Reconfiguring college loans — for instance by making debt repayments contingent on wages after college — might help young Americans overcome their fear of an enormous pile of debt.

Yet if the problem is not getting more Americans to enroll in college but to get those enrolled to finish it, we need to understand why it is that Americans drop out at such disproportionate rates — despite the promise of a high payoff at the end. Getting more Americans successfully through college requires ensuring that once they get there, they can reap the enormous profits of the experience.

And that looks likely to be a more complicated task than providing more college grants.

Many students are arriving in college without the needed preparation. In 2009, American 15-year-olds scored in 17th place in international reading tests — among 65 nations rich and poor. They scored in 27th place in math and 23rd in science — well below top achievers in other advanced countries. Studies have found that American students are disproportionately disadvantaged, compared with those of high-performing nations on international tests.

The pattern suggests that the main obstacle keeping Americans from a college education emerges long before they reach college.

“As we have larger proportions attending college, we are undoubtedly dipping down further in the preparation of students for college,” Professor Hanushek said. “This, in turn, leads to greater proportions of students dropping out before they complete a B.A. degree.”

This may call for a different approach to improve the nation’s college graduation rates. The best policy may require taking the money spent today to subsidize public higher education and using it to better prepare students before they get there.

E-mail: eporter@nytimes.com; Twitter: @portereduardo

A version of this economic analysis appears in print on June 26, 2013, on page B1 of the New York edition with the headline: Dropping Out Of College, And Paying The Price. Order Reprints|Today's Paper|Subscribe